Asean
Lifting Australia’s influence on China
Author: He Fan, CASS and ANU
Chinese President Xi Jinping is attending the 9th G20 Summit in Brisbane and is about to make a formal state visit to Australia. It could be a historic time for strengthening strategic cooperation between Australia and China.
Australia is well positioned to be an important player in the global arena, especially in Asia. Unlike Japan, Australia has no geopolitical conflicts with China, and does not need to worry about the so-called ‘China threat’. The economic structures of the two countries are complementary rather than competitive. China’s rapid economic growth in the last three decades has led to a boom in the Australian economy. China has become Australia’s largest trade partner: of every three dollars of the goods and services that Australia exports, one dollar flows from China. How can Australia leverage more out of its close economic relations with China? Apart from further deepening the bilateral economic cooperation through the newly endorsed free trade agreement, Australia and China can collaborate on several critical issues of importance to global governance, where Australia has the potential to increase its influence with China.
It appears that the China–Australia Free Trade Agreement, after nearly a decade of talks, will be finalised in time for President Xi’s state visit. This could benefit the Australian economy by around AU$2 billion (US$1.8 billion) a year. Besides the mining sector, which has gained a lot from China’s industrialisation and urbanisation, the services sector, which constitutes around 70 per cent of the Australian economy, will now have more access to the expanding Chinese market.
The world trade system is undergoing a rough transition. The WTO Doha negotiation remains stalled, and regional trade negotiations in Asia are as messy as a spaghetti bowl. The TPP, backed chiefly by the US, the Regional Comprehensive Economic Partnership (RCEP), proposed by the ASEAN countries, and the Free Trade Area of the Asia and Pacific (FTAAP), raised again by China at the APEC Summit meeting in Beijing, will be viewed by many as a competition for economic leadership in this region. Australia is in the unique position of being a partner in both the TPP and RCEP, as well as a major party in FTAAP from its origins. What worries China is a potential clash among blocs and backlash against globalisation. Australia, with its strong record of support for trade liberalisation and open regionalism, can help guide China and other countries through these issues as Asia’s dependable voice on trade negotiation.
Improving infrastructure can pave the way for long-term sustainable economic growth, create productivity-enhancing capacity in developed countries, and help alleviate poverty in developing countries. The demand for infrastructure investment is huge, yet there is a wide funding gap. Innovation and new institutions are needed for the financing of large infrastructure projects. In this context, China launched the 21-member Asian Infrastructure Investment Bank (AIIB). Australia showed interest at first, but has so far turned down the invitation to join.
Australia’s main concern, according to reports from the government, was the apparent lack of transparency of the structure of the bank. But if that were the case, Australia would have more influence by being involved than by standing outside. If China really wants to use the bank for its own benefit, then it would not have bothered to invite other countries to join. It is already investing billions of dollars abroad on infrastructure building, and will continue to do so. The reason that China took the AIIB initiative, which ties its own hands by joining a multilateral institution, is to shoulder more responsibility and increase its credibility as a global partner. Joining the AIIB still provides Australia with an opportunity to influence the direction and operation of this new international organisation.
Australia has made a great contribution to the G20 by insisting on economic growth as the priority of the agenda. Rather than finger-pointing and blame-shifting, now member countries are trying to work together on a series of practical issues like infrastructure investment, international tax cooperation, and job creation. While the legitimacy of the G20 has declined in the last several years, the success of the Brisbane G20 Summit will help to boost morale.
A number of think tanks in China and elsewhere are urging China to offer to take the presidency of the G20 in 2016. If this occurs, it would provide another chance for Australia and China to work closely with each other on global governance. In the G20 a ‘troika’ made up of the current, immediate past and next host countries work together on the summit agenda. If China takes the 2016 presidency, the troika would consist of Turkey, Australia and China.
China is rising steadily and trying to find its place in the new alignment of global power. The G20 is a major platform for dialogue and coordination between developed and developing big countries. China feels far more at ease at the G20 than in other forums like the G8. China needs the G20, and the G20 needs China. If and when China assumes the presidency, it should seek to strike a balance between the developed and developing countries in a well-designed agenda and through efficient organisation. This would boost the credibility of G20 greatly. Australia could provide valuable help in getting the right outcome.
The coming two years may well provide a special window of opportunity for progress in Sino–Australian cooperation. If this is to be the case, both countries will have to adopt a more forward-looking and proactive attitude. Each country has its own different diplomatic tradition, but to foster collaborative relationships, they will need to develop a habit of thinking collectively about common challenges of global economic governance together.
Dr He Fan is Deputy Director of the Institute of World Economics and Politics in the Chinese Academy of Social Science and currently Visiting Fellow at the Australian National University.
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Lifting Australia’s influence on China
Asean
ASEAN weathering the COVID-19 typhoon
Author: Sandra Seno-Alday, Sydney University
The roughly 20 typhoons that hit Southeast Asia each year pale in comparison to the impact on the region of COVID-19 — a storm of a very different sort striking not just Southeast Asia but the world.
Just how badly is the COVID-19 typhoon thrashing the region? And what might the post-crisis recovery and reconstruction look like? To answer these questions, it is necessary to investigate the strengths and vulnerabilities of Southeast Asia’s pre-COVID-19 economic infrastructure.
Understanding the structure of the region’s economic house requires going back to 1967, when Southeast Asian countries decided to pledge friendship to one another under the ASEAN framework. While other integrated regions such as NAFTA and the European Union have aggressively broken down trade barriers and significantly boosted intra-regional trade, ASEAN regional economic integration has chugged along slower.
Southeast Asian countries have not viewed trade between each other as a top priority. The trade agreements in the region have been forged around suggestions for ASEAN countries to lower tariffs on intra-regional trade to within a certain range and across limited industries. This has lowered but not eliminated barriers to intra-regional trade. Consequently, a relatively significant share of Southeast Asian trade is with countries outside the region. This active extra-regional engagement has resulted in ASEAN countries’ successful integration into global value chain networks.
A historically outward-facing region, in 2010 around 75 per cent of Southeast Asian commodity imports and exports came from countries outside of ASEAN. This share of extra-regional trade nudged closer to 80 per cent in 2018. This indicates that ASEAN’s global value chain network embeddedness has deepened over time.
Around 40 per cent of ASEAN’s extra-regional trade is with the rest of Asia. From 2010 to 2018 Southeast Asian countries forged major trade relationships with four Asian countries: China, Japan, South Korea and India. Outside Asia, the United States is the region’s major trading partner. ASEAN’s trade focus on Asia’s largest markets is not surprising. Countries tend to establish trade relationships with large, geographically close, and culturally similar markets.
Fostering deep relationships with a few large markets, however, is a double-edged sword. While it has allowed ASEAN to benefit from integration in global value chains, it has also resulted in increased vulnerability to the shocks affecting its network connections.
ASEAN’s participation in global value chains has allowed it to transition from a net regional importer in 1990 to a net regional exporter in 2018. But the region’s deep embeddedness in a small and tightly-coupled network cluster of extra-regional global value chain partners has exposed it to disruption to any and all of its external partners. By contrast, ASEAN’s intra-regional trade network structure is much more loosely-coupled: a consequence of persistent intra-regional trade barriers and thus lower intra-regional trade intensity.
In the pre-COVID-19 period, ASEAN built for itself an economic house held up by just five extra-regional markets, while doing less to expand and diversify its intra-regional trade network. The data shows that ASEAN trade became increasingly concentrated in these few external markets between 2010 and 2018.
This dependence on a handful of markets does not bode well for risk and crisis management. All of the region’s major trading partners have been significantly affected by COVID-19 and this in turn is blowing the ASEAN economic house down.
What are the ways forward? The immediate task at hand is to get a better picture of the region’s position in global value chain networks and to get on top of managing its network risk exposure. Already there are red flags around the region’s food security arising from its position in food value chains. It is critical to look for ways to introduce flexibility into existing supply chains for greater agility in responding to crises.
It is also an opportune time for ASEAN to harness the technology transfer gains of global value chain participation and invest in innovation-driven diversification of products and markets. The region’s embeddedness in global value chain networks certainly places it in a strong position to readily access large export markets not just in Asia but also Europe and the Americas.
Over the longer term, ASEAN is faced with the question of whether it should seriously look…
Markets
Tiger Trade Launches SGX Trading, Meeting Demand from Asian Investors
Access to the Singapore Exchange (SGX) adds to Tiger Brokers’ current menu of stock exchanges, such as the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (NASDAQ), the world’s two largest stock exchanges, as well as the Hong Kong Stock Exchange (HKEX).
SINGAPORE (ACN Newswire) – Tiger Trade, a one-stop mobile and online trading application by Tiger Brokers, has launched access to the Singapore Exchange (SGX).
(more…)Asean
Can Asia maintain growth with an ever ageing population ?
To boost productivity in the future, Asian governments will have to implement well-targeted structural reforms today.
Asia has been the world champion of economic growth for decades, and this year will be no exception. According to the latest International Monetary Fund Regional Economic Outlook(REO), the Asia-Pacific region’s GDP is projected to increase by 5.5% in 2017 and 5.4% in 2018. (more…)
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